Arundel Crest Terraces [2006] QBCCMCmr 59 (10 February 2006)

Last Updated: 19 December 2006

REFERENCE: 0747-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	31704
Name of Scheme:	Arundel Crest Terraces
Address of Scheme:	99 - 127 Greenacre Drive PARKWOOD QLD 4214

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Mr. Robert Grehan a co-owner of lot 1 and director/ shareholder of Amber Records Aust Pty. Ltd., the Caretaking Service Contractor.

I hereby order that the application for an order ceasing the painting contract with Sarhan Painters and Decorators is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0747-2005

"Arundel Crest Terraces" CTS 31704

ORDERS SOUGHT

Interim Order

The applicant, a co-owner of lot 1 and caretaking service contractor lodged an application with this Office on 21 October 2005 seeking the following Interim order:

To immediately cease continuation of painting the complex because:
- it is in contradiction to body corporate resolution passed at the Annual General Meeting;

- to determine the validity of the awarding of the painting contract by the body corporate based on the acceptance and contract entered into before resolution

- due to the omission by the body corporate of relevant quotations and the substance of quotations at the time the resolution was sought

- because the body corporate has not notified owners or the caretaker that the colour scheme of the complex has been changed without resolution and the body corporate has not informed or given notice for a resolution for this to occur

- that the whole complex is to be painted in one year not three as resolved by the body corporate at the AGM on 11 April 2005.

Outcome Sought

The applicant also advised that the following outcomes are sought:

- immediately ceasing of the painting contract with Sarhan Painters and decorators because of the improper awarding of the quotation and withholding of quotations from resolution
- investigation into the body corporate awarding of the contract and the failure to adhere to resolutions passed by the body corporate
- implementation of works by painting contractor that have not been subject to reporting, notice given and no resolution from the body corporate.
- False and misleading information distributed by the body corporate about the involvement and actions of the caretaker manager
- The validation of the election of the body corporate committee at an EGM and whether there was a conflict of interest within the body corporate not disclosed at the time of the body corporate election of office bearers.

SCHEME DETAILS

Arundel Crest Terraces is registered on a building unit plan of subdivision (now described as a building format plan). It comprises 48 lots, and is regulated by the Body Corporate and Community Management (Accommodation Module) Regulation 1997.

BACKGROUND

As mentioned in my earlier interim order, the applicant is the caretaking service contractor and this application relates primarily to the painting of the scheme buildings. It is also obvious that there is a significant level of animosity between the caretaking service contractor and the body corporate committee.

It is alleged that although quotations obtained from Sarhan Painters did not meet the specification and scope of works provided by the body corporate, the body corporate committee entered into a contract with Sarhan Painters on 31 March 2005 knowing that quotations were supposed to be tabled at the AGM on 11 April 2005 so that the body corporate in general meeting could decide quotation to accept.

The following allegations are also made in support of the application:

- that the body corporate committee did not produce two quotations to the AGM after the quotations had been accepted;
- that owing to certain omissions the contractor charged an additional amount to comply with the specifications and scope of works;
- decisions made by the committee involved a conflict of interest because they obtained a benefit as a result of the decisions;
- exclusion of the caretaker manager and the chair from participating in the Body Corporate and withholding information and decisions made by the body corporate.

SUBMISSIONS

For the purposes of deciding whether an interim order was warranted, I previously invited the Body Corporate Committee to make a submission by 14 November 2005.

Following the making of the interim order, submissions were sought regarding the following final outcomes sought by the applicant:

- investigation into the body corporate awarding of the contract and the failure to adhere to resolutions passed by the body corporate
- implementation of works by painting contractor that have not been subject to reporting, notice given and no resolution from the body corporate.
- False and misleading information distributed by the body corporate about the involvement and actions of the caretaker manager
- The validation of the election of the body corporate committee at an EGM and whether there was a conflict of interest within the body corporate not disclosed at the time of the body corporate election of office bearers.

Submissions were received from 12 of the 48 individual lot owners and also from the body corporate. Submissions from the 12 Individual owners re-iterated the concerns expressed by the applicant that the body corporate committee does not appear to be acting in the interests of the lot owners and is "controlled" by the partner of a lot owner. It is alleged that the current committee is in power because it has actively sought proxies and powers of attorney from lot owners.
Concerns were also expressed about the quality of the painting work and that the full cost of the painting work was not disclosed to the lot owners.

The Committee made the following submissions:

-	Subsection 242 of the Act provides that an application seeking to declare a resolution of the committee or a general meeting of the body corporate void should be made within 3 months of the meeting at which the resolution was passed. More than 5 months have now elapsed since the AGM and during this period a further EGM was held at which the minutes of the AGM were confirmed.
-	In compliance with section 102 of the Accommodation Module Regulation the committee submitted two quotations and the voting papers show two quotations for external painting of the scheme buildings were considered at the AGM in compliance with section 102 of the Accommodation Module Regulation;
-	The painting contract was in fact entered into at completion of the 2005 AGM but was back-dated to 31 March 2005 at the request of the painter and this is verified by a statutory declaration from the body corporate manager (copy provided);
-	The colour scheme has been modified since the commencement of work so that it now conforms with the original colour scheme;
-	a contractual dispute with the painter led to the body corporate signing a deed of settlement pursuant to which the painting will be completed in a 1-2 year timeframe instead of a 2-3 timeframe;
-	an engineer was engaged by the committee to monitor the quality of the painting work;

-	general law remedies are available in respect of alleged failure to perform the terms of the painting contract;
-	an action by the committee is enforceable by third parties irrespective of whether or not the committee was properly elected accordingly;
-	the body corporate manager has supplied an affidavit in which he has stated on oath that no member of the committee elected at the EGM owed the body corporate a debt at the time of the election;
-	the regulations allow nomination and election of a person appointed under a power of attorney;
-	in any event the body corporate is able to appoint a new committee at the next AGM;
-	the alleged interest of Mr Halilovic does not prevent him from voting in a general meeting and in any event he was not a member of the body corporate in 2005 when the contract was voted upon.

JURISDICTION

The application evidences a dispute in a community titles scheme within the meaning of section 227 of the Act).

Section 276(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about-

(a) a claimed or anticipated contravention of the Act or the community management statement; or

(b) the exercise of rights or powers, or the performance of duties, under the Act or the community management statement; or

(c) a claimed or anticipated contractual matter about-

(i) the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or

(ii) the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

DETERMINATION

The applicant initially sought an interim order to immediately cease continuation of painting the complex. As the parties would be aware, I declined to make an interim order (assuming that I was empowered to make such an order) as the painting work was well underway and an interim order in the terms sought by the Applicant had the potential to expose the body corporate to additional financial costs as well as inconvenience.

The current committee advises that In compliance with section 102 of the Accommodation Module Regulation the committee submitted two quotations for consideration at the AGM and the voting papers show two quotations for external painting of the scheme buildings were considered at the AGM in compliance with section 102 of the Accommodation Module Regulation.

Copies of the quotations have been provided. I note that the first quotation from Sarhan, dated 2 February 2005 is for $82,992 and covers painting of walls (one coat of paint), garage doors, gutters and eaves. I note that the second quotation from Opat, dated 24 January 2005 is for $86,200 and covers painting of walls (two coats of paint), garage doors, gutters and eaves (two coats of paint) and the masonry entry fencing.


A second quotation from Sarhan dated 2 February refers to "Painting for the front fence at No 111 Greenacres Drive , Arundel" but goes on to refer to painting of the roofs of 5 buildings at a cost of $7,900. It was subsequently discovered, and acknowledged by the body corporate manager and contractor, that this quotation had been signed in error.

A third quotation from Sarhan dated 2 February refers to "Painting for the front fence at No 111 Greenacres Drive , Arundel" and refers to painting the front fence at a cost of $1,360.

It also note that a dispute arose when Sarhan subsequently claimed that it was not bound by the "full scope of works" and relied upon the quotation which was accepted by the body corporate. A member of the body corporate (the applicant) directed Sarhan to cease work which was taken to be a repudiation by the contractor who sought damages. Legal advice obtained by the body corporate confirmed that there was doubt as to whether the contractor was bound by the "full scope of works" and as a result, a deed of settlement was approved by the committee on 26 August 2005 under which the body corporate was to pay a certain amount to Sarhan and the contractor was not required to paint the 5 roofs mentioned in the quotation inadvertently signed by the body corporate manager on 2 February 2005. The above state of affairs is unfortunate and is demonstrative of the pitfalls faced by body corporate committee even when assisted by a body corporate manager.

I do not believe that are any grounds to intervene in the contractual arrangement between the body corporate and the contractor. It is a long standing principle of common law, confirmed by section 310 of the Act, that contractual arrangements entered into by the committee are enforceable by third parties against the body corporate, irrespective of whether or not the committee was authorised to do so, or was properly elected. Rather, these are matters of "indoor management".

The body corporate manager has supplied an affidavit in which he has stated on oath that no member of the committee, elected at the EGM, owed the body corporate a debt at the time of the election and further, the material provided by the body corporate confirms that the non-owner was acting under a power of attorney and entitled to be elected to the committee on this basis.

However this is not to say that the body corporate has no remedies available to it for defective workmanship. Should the body corporate be dissatisfied with the quality of the final paintwork, the usual contractual remedies are available to the body corporate as they are to any person or body corporate which is not satisfied with the workmanship of a tradesperson which it has engaged.

Finally, the Act provides for democratic election processes and it stands to reason that if lot owners are dissatisfied with a particular body corporate committee they can take action to replace the committee.

Having regard to the above I have dismissed the application.